Corporate Finance Workbook A Practical Approach

MICHELLE R. CLAYMAN, CFA, is Founder, Managing Partner, and Chief Investment Officer of New Amsterdam Partners LLC, an institutional money management firm in New York City. She has been published in the Financial Analysts Journal and the Journal of Investing, and is a frequent commentator for CNBC, Bloomberg, and other financial media outlets.

MARTIN S. FRIDSON, CFA, is the CEO of FridsonVision LLC in New York City and is known for his innovative work in credit analysis and investment strategy. He is the author of several highly acclaimed books on financial statement analysis, high-yield debt, and financial history and is the youngest person ever inducted into the Fixed Income Analysts Society Hall of Fame.

GEORGE H. TROUGHTON, CFA, is Professor Emeritus of Finance at California State University, Chico. He is a recipient of the C. Stewart Sheppard Award for the advancement of education in the investment profession as well as the Donald L. Tuttle Award for CFA Grading Excellence.

CHAPTER 1 Corporate Governance 3

Learning Outcomes 3

Summary Overview 3

Problems 5

CHAPTER 2 Capital Budgeting 11

Learning Outcomes 11

Summary Overview 12

Problems 15

CHAPTER 3 Cost of Capital 29

Learning Outcomes 29

Summary Overview 29

Problems 31

CHAPTER 4 Measures of Leverage 39

Learning Outcomes 39

Summary Overview 39

Problems 40

CHAPTER 5 Capital Structure 45

Learning Outcomes 45

Summary Overview 45

Problems 46

CHAPTER 6 Dividends and Share Repurchases: Basics 51

Learning Outcomes 51

Summary Overview 51

Problems 52

CHAPTER 7 Dividends and Share Repurchases: Analysis 57

Learning Outcomes 57

Summary Overview 57

Problems 59

CHAPTER 8 Working Capital Management 63

Learning Outcomes 63

Summary Overview 63

Problems 64

CHAPTER 9 Financial Statement Analysis 67

Learning Outcomes 67

Summary Overview 67

Problems 68

CHAPTER 10 Mergers and Acquisitions 73

Learning Outcomes 73

Summary Overview 74

Problems 75

PART II Solutions 83

CHAPTER 1 Corporate Governance 85

Solutions 85

CHAPTER 2 Capital Budgeting 87

Solutions 87

CHAPTER 3 Cost of Capital 99

Solutions 99

CHAPTER 4 Measures of Leverage 103

Solutions 103

CHAPTER 5 Capital Structure 107

Solutions 107

CHAPTER 6 Dividends and Share Repurchases: Basics 111

Solutions 111

CHAPTER 7 Dividends and Share Repurchases: Analysis 113

Solutions 113

CHAPTER 8 Working Capital Management 115

Solutions 115

CHAPTER 9 Financial Statement Analysis 119

Solutions 119

CHAPTER 10 Mergers and Acquisitions 125

Solutions 125

About the CFA Program 131

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